Fulfilling Asia’s Energy Needs Investor Presentation October 2011 1
DisclaimerThe information contained in this presentation (“Presentation”) has been prepared by Prophecy Resources Corp. (“Company”) and is being communicated for general background informationalpurposes only. The Presentation has not been independently verified and the information contained within is subject to updating, completion, revision, verification and further amendment. Neither theCompany, nor its shareholders, directors, officers, agents, employees, or advisors give, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, theaccuracy, reliability or completeness of the information in this Presentation, or any revision thereof, or of any other written or oral information made or to be made available to any interested party or itsadvisers (all such information being referred to as “Information”) and liability therefore is expressly disclaimed. Information contained in this Presentation is the property of the Company. 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This Presentation contains orincorporates by reference “forward-looking information” which means disclosure regarding possible events, conditions, acquisitions, or results of operations that is based on assumptions about futureconditions and courses of action and includes future oriented financial information with respect to prospective results of operations, financial position or cash flows that is presented either as a forecast or aprojection, and also includes, but is not limited to, statements with respect to the future financial and operating performance of the Company any of its subsidiaries and other considerations as set out inmore detail in the documents filed by the Company with the Toronto Stock Exchange. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “proposes”,“expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certainactions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors whichmay cause the actual results, performance or achievements of the Company and/or its current and proposed subsidiaries to be materially different from any future results, performance or achievementsexpressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this Presentation and the Company disclaims any obligation to update anyforward-looking statements, whether as a result of new information, future events or results or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements due to theinherent uncertainty therein. In addition, investors are cautioned that this presentation may contain information about mineral properties adjacent to or near the Company’s properties and in which theCompany has no right or interest. Mineral deposits on such adjacent or near properties are not indicative of the mineral deposits, if any, which may be found on the Company’s properties. Mineralresources that are not mineral reserves do not have demonstrated economic viability. Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of theTSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. Certain statements contained in this Presentation, including statements which may contain words such as"expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions, and statements related to matters which are not historical facts, are forward-looking information within themeaning of securities laws. Such forward-looking statements, which reflect management’s expectations regarding Prophecy’s future growth, results of operations, performance, business prospects andopportunities are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements of the Company tobe materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Forward-looking statements in this Presentation include, withoutlimitation, statements regarding the permitting, development and production of the Company’s Chandgana Power Plant, including approval of the license to build Chandgana Power Plant from theMongolian government and completion of a feasibility study by late 2011 and other information concerning possible or assumed future results of operations of Prophecy. Material risks and uncertaintieswhich could cause actual results to differ materially from such forward-looking statements include, but are not limited to, exploration, development and production risks, risks related to the Company nothaving a history of mineral production, risks related to the development of the Chandgana Power Plant, risks related to the uncertainty of mineral resource and mineral reserve estimates, the cyclicalnature of the mining industry, risks related to the availability of capital and financing on acceptable terms, commodity price fluctuations, currency exchange rate and interest rate risks, risks associated withoperating in foreign jurisdictions, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays inreceiving government approvals, and unanticipated environmental impacts on operations and costs to remedy same. Assumptions underlying our expectations regarding forward-looking statements orinformation contained in this Presentation include, among others, that all required third party contractual, regulatory and governmental approvals will be obtained for the development, construction andproduction of the Company’s properties, there being no significant disruptions affecting operations, whether due to labour disruptions, currency exchange rates being approximately consistent with currentlevels, certain price assumptions for coal, prices for and availability of diesel, parts and equipment and other key supplies remaining consistent with current levels, production forecasts meetingexpectations, the accuracy of the Company’s current mineral resource and reserve estimates, labour and materials costs increasing on a basis consistent with the Company’s current expectations and thatany additional required financing will be available on reasonable terms. Although Prophecy has attempted to identify important risks and factors that could cause actual actions, events or results to differmaterially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not anticipated, estimated or intended. Accordingly, readers shouldnot place any undue reliance on forward-looking statements as such information may not be appropriate for other purposes. We disclaim any intention or obligation to update or revise any forward lookingstatements, whether as a result of new information, future events or otherwise, except as required by law. 2
Why MongoliaMongolia Stock Exchange Index returns:• 125% returns in 2010• 35% returns (ytd) in 2011 3
Mongolia: the new frontier• Pro‐business democratic government• Resource rich nation • Mongolian coal export up 43% ytd (yr over yr)• Increasing global market attention and activity • SouthGobi HK IPO 2010 – Raised $500 million equity • MMC HK IPO 2010 – Raised $650 million equity • TavanTolgoi IPO HK/LSE 2011/2012 ‐ $5+ billion valuation 7
Prophecy CoalSymbol TSX PCYShares 198 million (basic); 240 million (diluted)Ave shares traded (LTM) 700,000 per dayMarket cap ~ C$100 millionOwnership 50% retail 30% institutions 20% insidersCash ~ C$4 Million (as at end of August 2011)Debt NilInvestment portfolio ~ C$75 millionLocations Headquarter: Vancouver, BC, Canada Core mining assets: Mongolia 8
Why Invest in Prophecy Coal• Proxy to growth in Mongolia and China• Strong demand for thermal coal and electricity• Long life,low cost producer with 1.4 bt* supply • Commenced coal production, permitting power plant• Strong growth profile *Ulaan Ovoo: 174 million tonnes of measured and 34 million tonnes of indicated coal. Ulaan Ovoo’s resource numbers are from the Dec 2010, 43‐101 Prefeasibility Study by Wardrop Engineering. Chandgana consists of two properties‐Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43‐101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who is an independent Qualified Person under NI 43‐101. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43‐101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. 9 Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is an independent Qualified Person under NI 43‐101.
Leadership: Management TeamJohn Lee, CFA – Chairman / CEO • Entrepreneur (BSEE, BAEcon: Rice U.) Started PCY in Oct 2010 • PCY market cap $1 million to $200 million in 14 monthsIrina Plavutska, CGA ‐ Interim CFO • 20 years+ senior financial experiencePaul Venter – Director / VP Operations (Ulaan Baator) • 30+ years mining/power experience with BHP/Eskom/En+ • Focus on Russian and Mongolian coal since 2006 with En+Ronnie Van Eeden ‐ VP Mining Operations(Ulaan Baator) • 30+ years mining experience with Eskom / Sasol • Management of the mining and supply of 90 to 100mt/year 10
Leadership: DirectorsChuluunbaatar Baz • President and Chairman of Monnis Group • Monnis has over 1,000 employees, top 10 company in MongoliaJivko Savov • Deputy CEO of En+, company owned by Oleg Derispeska • Ex‐Chairman of Rusal, Chairman of EurosibEnergo Michael Deats • Ex‐Managing Director of BP Coal South Africa, Ex‐Director of EskomGreg Hall • Director of various public resource companies • Formerly at Haywood Securities, Canaccord Capital and Leede FinancialPaul Mackenzie • Director of various public resource companies 11
Ulaan Ovoo Mine100% ownedReserve*: 20 Mt (Proven)Resource*: 209 Mt (M&I)High quality thermal coal Low strip surface mining Potential sales to: May 2011 •Offshore markets (China, South Korea, Japan) •Domestic (Mongolia, Russia)*Ulaan Ovoo: 174 million tonnes of measured, 34 million tonnes of indicated, and 20.7 million tonnes of proven coal. Ulaan Ovoo’s resource numbers are from the Dec. 2010, 43‐101 Prefeasibility Study by Wardrop Engineering. July 2010 13
Ulaan Ovoo: Competitive CoalHigh quality and abundant coal • Min AR 5,000 kcal/kg, Max 1% sulphur, 10% ash* • 20+ year mine life*Low cost mining • Single seam, 50 meters thickness, Strip ratio 2: 1 *Information basd on Dec. 2010, 43‐101 Prefeasibility Study by Wardrop Engineering. 14
Ulaan Ovoo: to dateEquipment • Two complete fleets, capacity 600kt/annum • 18 coal haul trucksProduction • 1.5 million bank‐cubic‐ metres of waste removed • 230,000 tonnes of coal stockpiledPort allocation secured 15
Forecasted Thermal Coal Prices Continued market strengthUS$ / tonne High Average Low Based on analyst reports for Newcastle from National Bank Australia, Danske Bank, Commerzbank, Standard Chartered, Societe General, Barclays, Deutsche, CIBC, Morgan 16 Stanley, RBC
Ulaan Ovoo: next stepsAgreements outstanding • Russian rail • Off‐take agreements: Offshore and domesticIncrease run‐rate • Lower costs • Still in pre‐commercial production statusOpen border • Lower transport costs 17
Chandgana 100% owned Resource*: 1.2 Bt (M&I) Thermal coal Low strip surface mining Mine‐mouth Power Plant • US$0.06 kw/h = US$100/t coal 100 sq km prospective claims *Chandgana consists of two properties‐Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43‐101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who is an independent Qualified Person under NI 43‐101. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43‐101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is an independent Qualified Person under NI 43‐101. 18
Chandgana: CoalAbundant low cost coal• Low strip (0.5:1)• Next to rail and paved roads Coal• Low ash and low sulfur 20m ClayMining license obtained for 140 Mt 40m Coal 20
Chandgana: Value chain 150 km to Powerline 400 km to China 9 kmChandgana Proposed Installed capacity: Power TransmissionCoal Mine Phase I: 600 MW (connect to CES, EES of Mongolia) Phase II: 3600 MW (connect to China) Meeting Mongolia’s Power Needs 21
Mongolia Power Supply / Demand ForecastMW 1600 Demand 1400 1200 Deficit of 744 MW 1000 800 600 Supply 400 Russia EES 200 CES 0 2010 2011 2012 2013 2014 2015 Source: Energy International 22
Chandgana: Location advantage Mongolia is currently importing power from Russia Russia at a rate of Ulaan Ovoo $0.08 per kWh Mongolia Chandgana Central Energy system (CES) Eastern Energy system (EES) New transmission lines Proximity to China:100 km China ‐ China: 400 km ‐ Beijing: 1,000 km 23
A pure‐play coal companySpin‐out of nickel and PGM assets to Prophecy Platinum Corp. (TSX‐V: NKL)• Completed June 2011• NKL is owned 45% by PCY and 45% by PCY shareholdersProphecy Resources renamed to Prophecy Coal Corp.• Focus solely on coal 25
Investment PortfolioProphecy Platinum (NKL: tsx‐v)Canadian exploration Company that has focused primarily on developing and seeking sulphide nickel and platinum palladium group properties. Current Canadian properties include Burwash, Wellgreen, Lynn Lake and five prospects in Uruguay and an advanced Las Aguilas Nickel PGM deposit in Argentina. Visit prophecyplat.com for more details. Prophecy Coal owns 22.5 million shares.Victory Nickel (NI: tsx)Canadian company with sulphide nickel deposits containing significant 43‐101‐compliant nickel resources: Minago, Mel and Lac Rocher. Visit victorynickel.ca for more details. Prophecy Coal owns 36.6 million shares.Compliance Energy (CEC: tsx‐v)Canadian resource company that has coal interests in British Columbia, Canada. CEC owns 60% of the Raven Underground Coal project is 43‐101 compliant semi–soft coking coal M&I resource of 72M tonnes. Visit complianceenergy.com for more details. Prophecy Coal owns 5 million shares. Total current market value ~ $75 million 26
The Road AheadUlaan Ovoo: continued growth • Lower costs • Off‐take agreementsChandgana: continue down the process • Power Plant license (Q4 2011) • Bankable feasibility study (Q4 2011) • Conclude PPA (early 2012) • Construction early (early 2013)TSX Main Board listing (Q4 2011) 27
Why Invest in Prophecy Coal• Proxy to growth in Mongolia and China• Strong demand for thermal coal and electricity• Long life,low cost producer with 1.4 bt* supply • Commenced coal production, permitting power plant• Strong growth profile *Ulaan Ovoo: 174 million tonnes of measured and 34 million tonnes of indicated coal. Ulaan Ovoo’s resource numbers are from the Dec 2010, 43‐101 Prefeasibility Study by Wardrop Engineering. Chandgana consists of two properties‐Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43‐101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who is an independent Qualified Person under NI 43‐101. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43‐101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. 28 Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is an independent Qualified Person under NI 43‐101.
2nd Floor, 342 Water Street Vancouver, BC , Canada TSX: PCY1.firstname.lastname@example.org See our latest corporate video at www.prophecycoal.com 29
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